Korean Air Lines Co., South Korea’s top airline, will buy its smaller local rival Asiana Airlines Inc. in a deal valued at 2.5 trillion won (US$2.3 billion) that would create the world’s 10th-biggest airline by fleets, industry sources said Monday.
Korean Air will sell new shares worth 2.5 trillion won to finance the deal, with its parent Hanjin KAL Corp. injecting 800 billion won, according to the sources.
Korean Air, currently the world’s 18th largest, will buy a 30.77 percent stake in Asiana Airlines from the smaller carrier’s creditors led by the state-run Korea Development Bank (KDB).
The KDB plans to invest 500 billion won in shares to be issued by Hanjin KAL and 300 billion won in the company’s convertible bonds.
Hanjin KAL is expected to submit a letter of intent to the KDB early this week to proceed with the deal.
The majority Asiana stake is held by Kumho Industrial Co., an affiliate of airline-to-petrochemical conglomerate Kumho Asiana Group.
In September, Asiana’s creditors ― the KDB and the Export-Import Bank of Korea ― decided to end a drawn-out deal to sell Asiana to a consortium led by HDC Hyundai Development Co. over differences over terms of the deal amid the extended COVID-19 pandemic.
The HDC-led consortium initially signed the deal to acquire Asiana from Kumho Industrial, as well as new Asiana shares to be issued and the carrier’s six affiliates, for 2.5 trillion won (US$2.3 billion).
But HDC later demanded a renegotiation with Kumho and the creditors over the terms and another round of due diligence on Asiana to reflect the pandemic’s impact on the airline industry. The demand was rejected by the creditors. (Yonhap)